Another Big Bank Failure: More Likely Than Not to Occur 46 comments
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Countrywide was forced into a fire sale vs. bankruptcy situation. It was totally insolvent and reeked of non-performing, illiquid and depreciating assets.
Merrill Lynch (MER) was forced into a fire sale vs bankruptcy situation. It was totally insolvent and reeked of non-performing, illiquid and depreciating assets.
Bank of America (BAC) bought both of these companies. Hmmmm. Look at its share price and balance sheet. Where do we think all of those reeking assets ended up?
Bear Stearns was forced into a fire sale vs. bankruptcy situation. It was totally insolvent and reeked of non-performing, illiquid and depreciating assets.
Washington Mutual was forced into a fire sale vs bankruptcy situation. It was totally insolvent and reeked of non-performing, illiquid and depreciating assets.
JP Morgan (JPM) bought both of these companies. Hmmmm. Look at its share price and balance sheet. Where do we think all of those reeking assets ended up?
The government virtually nationalizes Citibank (C), one of (use to be, anyway) the world's largest banks.
Goldman (GS) falls in price by ~75%, Morgan Stanley (MS) likewise. They are both forced to become commercial banks. Morgan decides to play the retail banking game, but Goldman appears to remain obstinate. I think they are still punch drunk from drinking their own (we're the best on the Street) Kool Aid.
I stated in the past, they have a very high share price correlation to their brethren (most of which no longer exist) and they still have some of the most illiquid and dangerous assets on their books. Yes, they have delevered significantly over the last few quarters, but a forensic glance shows that this delivering was achieved by selling the more liquid and marketable stuff, thus actually increasing the concentrations of the stuff that made them need to delever in the first place.
Now, this is a judgment call by management, and I will not argue with it. I am sure they are loathe to sell depreciating assets in a down market when they probably feel the market will turn in the near to medium term.
I look at it this way though. They wrote leveraged products on overvalued underlyings at the top of one of the most effervescent bubbles in modern history. Now the bubble has popped, and reality is hastily approaching. Many companies from the previous year would have been much better off (actually, would still be in business), if they bit the bullet and sold at a loss today in lieu of waiting tomorrow when their assets for sale are definitively worth less than the aggregate debt used to finance them. That is the danger of 30x leverage, and that is the danger with what's left with these banks.
We don't know what the leverage ratio is for these banks. Although many (example Goldman and Citi) have taken their leverage down considerably - we really don't know from what level it is truly coming from. Almost all of the off balance sheet vehicle, specifically the SIV's, use significant leverage. The reporting on them is murky at best, non-existent for the most part. Make no mistake, there is exposure to economic risk from these entities. Thus, as Goldman delevers by selling few things that it probably should keep, it amasses greater concentrations of the things most likely to kill it.
Think of a woman that sheds lots of water (marketable assets) to lose weight to impress beauty judges (short sighted shareholders, shorter sighted regulators, and the sell side game), thereby building up dangerous levels of toxicity within her system. Now, the woman looks a lot better from the outside, and may even win a trophy, but the poisons within are now undiluted and potentially killing her. The pretty woman that walks down the aisle very well may collapse (like so many of her sisters from last year), and I get the feeling that if she does, everyone will act surprised.
"Won't the government help us?"
Many of my lesser aware associates are still of the mindset that the government will pull us out of this one. I am put in mind of those who blindly follow religion without bothering to once wonder exactly how all of those miracles may actually work. I believe it is a lot easier for government to allow us to go down the path to recession than it is to work our way out of it. Recession is natural and normal anyway, and needs to happen. The kicker is that we had a wildly voracious up-cycle that ridiculed both the fundamentals and fiscal prudence - this lasted for about six and a half years.
We have seen roughly one and half years of carnage. Methinks that we have roughly three to six years more of this to go, or 12 to 18 months of a hyper accelerated, extremely destructive downward plunge - one that would have 2008 something the optimists would end up wishing for. The only variable is the velocity of the descent. It is guaranteed, a given, that mother equilibrium will insist upon returning to her pre-bubble ways, and potentially then some.
I rant ad nauseum because I find myself returning back to the big money center banks mentioned above.
As you all know, I shorted all of the names mentioned above heavily backed by some rather comprehensive fundamental and forensic research, and am still short most of those that are still in business. The trades were roughly six months to a year in duration, and although proved to be very, very profitable (several scoring more than 100 point hits) had a significant amount of volatility introduced that produced some nasty drawdowns. These drawdowns came from bear market rallies that were sparked by the "Won't the government help us?" mentality.
As stated earlier, recession is a natural and inevitable occurrence that needs to happen, just as much so as economic boom times. The dead banks will have to die. It's just a matter of whether we get it over quickly and allow the Phoenix to rise from its ashes to start anew, or we drag this out in a form of macro-economic water torture.
Remember, mortgage banks were dropping like flies. Bear Stearns collapsed over the weekend. The Fed backstopped investment banks by allowing unprecedented borrowing from the Fed discount window, accepting as collateral practically anything, stocks, private labeled MBS, baseball cards, manure and fertilizer (Okay, I was joking about the baseball cards). This allowed the market to rally from the March lows that was put in by the Bear Stearns collapse. After all, the government has unlimited resources and they have pretty much stated that they will not allow a large investment bank to fail.
Six months later, a large investment banks fails in the form of Lehman Brothers. What happened? The government said it wasn't their fault. They had no viable buyer. What happened to the government sanctioned liquidity? What did Lehman and Bear have on their books that the other ex-I banks don't? The short answer is nothing. They had higher concentrations o mortgage related assets.
That may sound bad given the occurrences of the past year, but it trust me, it sounds worse than it is. This was not a real estate or mortgage crisis, but an asset securitization crisis born from the punch drunk giddiness to be had when lenders and their cronies have access to nigh unlimited balance sheets and liquidity, and very limited recourse and responsibility for their actions. Thus, any asset that was normally lent against, was most likely abusively lent against under this scenario. Real assets and mortgages were simply the first to pop, starting with subprime, and as we have already seen, definitely not ending there.
As a matter of opinion, it is quite probable that the other asset classes that have bore witness to the lending abuses very well may be hit harder than real estate and mortgages - if not on an individual basis, then definitely on an aggregate basis. This is where Goldman, Morgan, HSBC (HBC), et. al. will see real pain. This is why Goldman's level 3 assets are actually increasing as they delever. Think private equity, think, leveraged loans, think venture capital. Just think...
Do you really think the government can prevent another big bank failure? It will happen sooner or later, but looking at the current condition and prospects, it appears to be more likely to happen than not.
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This article has 46 comments:
Let's not forget basics. Just because we have low clouds and fog does not mean the sky is falling.
can anyone write a comment like this to pump a position???
if so where do I apply..I would like to pump some of my stocks...
Except, there aren't any problems hounding them. Sure they lost and will continue to bleed quarterly, but they have access to the Fed Discount Window and for all intents and purposes are money-center banks.
Reggie Middleton - - -
Now that I have buried my general criticism of your article in my comment above, I will say that I found you expressed some defendable opinions. I would summarize by saying: I would have liked to have gotten your opinions in a more succinct package, perhaps with a little specific data for nerd types like me.
Government has been..in the very recent past..more than willing to make equity institutions pay the price of mistakes (moral hazard). The last few months have convinced me that moral hazard for groups government considers "vital" is DEAD. If our leaders were content to let a severe recession (or even depression) run its course they certainly wouldn't have bailed ANY auto manufacturer..that is a move of mindless desperation that really speaks to the general fear that the United States can't handle economic problems without social unrest and SEVERE dislocations occuring.
Reggie is certainly correct about one thing...unlimited and cheap credit and the willingness to pass it along to anyone drawing a live breath was the beginning of this fiasco..AND THAT WAS AS MUCH A LOCAL PROBLEM AS A NATIONAL GOVERNMENTAL ISSUE. It was loan officers at YOUR bank..it was appraisers that came to YOUR neighbors homes for sale..and YOUR local real estate agents who implemented this thievery at a level all of us saw.
You seem to think everybody know who you are and follows your every word. Something is seriously amiss with your grasp of reality. In turn, your article reeks of it.
You need to get out more often.
Reggie has been consistently bearish on the financial stocks for many months. I, for, one, am appreciative of his insights and articles, and have made a lot of money following many of his short recommendations. I would have done even better if I had followed them more aggressively!
Given government backing of the banks, he may now be overplaying his hand. Or maybe not. I don't have the stomach to short them any more. However, his research is incredibly detailed and has been insightful. He is consistently one of the most worthwhile posters.
======================...
On Dec 30 02:56 PM chicagoguy4 wrote:
> It is time for the accounting to reflect true assets rather than
> speculations. The banks fall is based upon a failure of the banks
> to make a true evaluation of what is carried on the books as an asset.
Like them, I had unlimited faith in my country and my government and it's ability to protect our "way of life". So I bet heavily on Lehman Brothers when it became far too cheap. And now I sit here, holding nothing.
And then I bet heavily on Wahington Mutual, when it became far too cheap. Our nation's largest Savings and Loan. A company which had been around for more than 100 years, and had survived the Great Depression. And today, I sit here with nothing.
I started buying our nation's largest bank (Citigroup), when it had lost half its value in only 6 months. And today, I sit here with an investment worth only 15 percent of what I paid for it. And that's AFTER a massive government intervention to stop it from going the way of Lehman Brothers et al. For now.
And being a student of "macro" affairs, I can't help but realize that the actions our government is taking today --- to prop up a failed economic model based upon relentless expansion and endless credit --- are doing nothing more than inflating the largest economic bubble of all time. Teaser mortgages pale by comparison. When the bubble of "obligations of the US Government" pops, you won't want to be anywhere near anything which is related to prior values in the global financial markets --- unless you are now buying it at 5 to 10 cents on last year's dollar (or less).
And I'd recommend that everyone put at least 25 percent of their portfolio into gold and silver and other "non-national" assets, just in case you and I are right and they are wrong. The way I view it, it is cheap short-term insurance. It'll be easy enough to scale back out of the position, if our worst fears don't come true and everyone ultimately gets a good laugh on us.
But buying Treasuries as a "safe haven"??? That's downright funny. The world's largest economy has doubled its debt (leverage) in only the last 8 years. And then doubled it yet again, within only the last 12 months. Four years from now, the US will owe all of its future economic productivity for at least the next 25 years to repay what it has borrowed in only the last 10. You want to invest in "that" ????
No thanks. I'd much rather finance the mortgage for a subprime borrower with no documentation. That way, at least, I'd have something like a 35 to 40 percent chance of being repaid!
I recently responded to another post in this site regarding REITS, if one recalls Goldman's last conference call just about two weeks ago, they had absolutely dismal things to say about commercial real estate loans. Horrifying, in fact. We've certainly become aware of credit card debt, car loan debt, student debt, etc. However, those may pale in comparison to corporate debt.
Regardless, so many have come to the conclusion that the worse in the housing market has been priced in and it will all come to a bottom in six months. Ha! A whole new world of pain awaits with the pay-option ARM mortgages getting prematurely pushed to early hard recasting due to the preciptious drop in housing values.
Due to their five-year hard recast nature, most weren't expected to hit the banks in earnest until 2010. However, they have this nugget buried in their pits...a maximum 110% or 115% negative amortization trigger. Since approximately 80% of these mortgages have utlitized the interest only payment minimum, nothing has been paid into principal. Add to that the 20% or so decline in house values and these loans are coming to that trigger point years early. These will be instant defaults. INSTANT, as payments will virtually double for a house that people will now be overhwhelming underwater in.
These loans could make subprime look like a stroll in the park.
Bank of America and JP Morgan will be forced into a shotgun wedding in 2009 according to "The Penny King"
www.associatedcontent....
Goldman is likely to make a few fees from selling worthless mortgage backed securities to the Fed as one of 4 knights of the Money Kings!
There are about 17 good articles linked below that will confirm your side of the coin as it falls to the floor...tails I win...heads the government loses:
www.associatedcontent....
the LEH puts returned 16x --- with long term cap tax rates!
I'm less sure about it now ---- the USG seems unlikely to let any of the remaining big players fail, though they may be forced by an angry populace to cram down serious haircuts to equity and bond holders.
To those crudely dissing Reggie's work ---- your ignorance is showing ---- you'd be embarassed if you had a clue.
As a commenter inferred earlier, your criticisms will hold much more weight if delivered with just the slightest modicum of professionalism.
Now, for those that want more detail, or believe that I don't do any "real" research, I suggest you look at the original article which has links to some of the Goldman and Morgan research (look in the green sidebar to the right) - boombustblog.com/index...
For those who need freebies, I release the original Goldman Research for free - boombustblog.com/image... since it is now obsolete.
I shorted Morgan Stanley and Bear Stearns in January, and Goldman in May while many of sheeple were still of the mindset that these "namebrands" can do no wrong. I'll let you do the math.
I'm going to break with tradition here and be a little more forthcoming with my results. My blog's research model looks to be finishing the year over 100% in the black - and that is a static research model. See boombustblog.com/index...
My proprietary trading account (which is dynamic) should be finishing the year at a multiple in excess of 3 or 4 times that, and would have been considerably more save a nasty drawdown that I decided to suffer through from last month. I am open to all comments and criticisms, but I happen to be fairly pleased with my results (though I am rather pissed at myself for a few expensive trading errors), and so are the 3,000 or so subscribers to my blog.
I welcome all the naysayers to come by the blog and try out the sample research and opinions. I have covered roughly 74 stocks to achieve these triple digit returns, and the formal reports are roughly 20 pages in length. There are literally thousands of pages of research which should be more than enough detail to satisfy the "nerd" in all of us.
Now, will the past repeat itself? I don't know but I read a lot of bullish expectations on SA, a frantic need to justify higher valuations. Usually permabears have been wrong (thanks to the FED) but this time I feel something is kind of broken. Unlimited prosperity for all doesn't seem to be possible, at least not at the speed this thing was going. Be prudent.
Now, will the past repeat itself? I don't know but I read a lot of bullish expectations on SA, a frantic need to justify higher valuations. Usually permabears have been wrong (thanks to the FED) but this time I feel something is kind of broken. Unlimited prosperity for all doesn't seem to be possible, at least not at the speed this thing was going. Be prudent.
Businesses succeed or fail largely because they serve an un-met need or meet them better than others. That is lassiez faire at work. The Best survive.
I see now that all the I-Banks are Bank Holding Companies, they are fish of the same stripe. Whereas, perhaps in the past they were somewhat differentiated and thus meeting an unmet need, and their existence was or could be justified. For example - Bear was too smallish a IB and good at nothing particularly, Lehman was mainly into Bonds and Fuxed income, till they went astray, Goldman was perhaps into Prop Desk trading (or what they really did well was to tell most folks to go long with their recommended positions while using their prop desk simultaneously to go short, knowing fully well that what their IB's touted was basically worthless anyhow and was foisted on the greedy and not the needy) and they did Private Wealth Management (favouring their buddies - aka Paulson hiring his protege to start TARP), Merrill claimed to be into retail brokerage with advise (as opposed to an e-Trade or a Schwab, which is just discounted "nothing" - you get what you pay for! (you pay peanuts you get monkies), but now, there is almost no differentiation between them. All Bank Holding Companies with one sponsor for money - Mr. Bernake or Mr. Paulson.
So we need maybe one mega institution and rest will have to re-invent themselves into something else or they shall ordinarily fail.
As an example, look at our Auto companies. All produce similar results at the same time. Basically all are broke. One survives?
Fundamentally, in an otherwise free economy, there can only be one least cost provider. And mostly only one gets there (to be least cost provider) faster than others and thus emerges as the eventual winner.
As I see it, we now have 5 or 6 mega US Banks (all with one large source of money - the FED's and all get charged the same for their borrowings at the Fed), and all we need is one Bank with a national or International footprint, or make it two. Not 10, as we have now! So pick your winner and toss the rest.
Who do you think is best of class right now with the chance to be the least cost provider? I doubt if it is GS or MS? They still buy fesh flowers for their offices and claim to make money still fleecing folks like AIG (the Fed's Ahem!), and get paid many milions each month nowadays to help advise the unwinding of AIG! Phew, what a scam! They put them there in the first place and now getting paid to unwind?? This is a franchise you wish to own?
Fundamentally speaking, Reggie is absolutely correct. Its simply a matter of whether events repeat. As a contrarion, it leaves me with great considerations. Thank you.
The big banks are using borrowed TARP funds to shore up their reserves against expected MBS losses, but appear to not be underwriting much consumer lending. Does this mean that they are hiding in treasuries until their leverage can be healed? Is their stampede to safety part of what has driven yields to near zero?
If the banks are exposed to trillions of dollars in treasures that were bought at prices so high that yields are near zero (i.e. the treasury bubble), what happens in 1-3 years when interest rates rise, and these bonds lose value? Example: say 10yr treasury bonds issued in 2011 yield 6%. 10yr treasury bonds, bought in 2008 for near 0% yields, have to go down in price by almost 6% in order to match the return available on new bonds, right? Isn't this scenario a repeat of what happened with mortgage-backed securities? You know, where trillions of dollars in bank assets suddenly and unexpectedly lost market value? Plus, the banks will surely have used these "safe" treasuries as collateral for another layer of loans, just as they did with MBS's.
Sounds like bank crisis II to me. Although the liquidity of treasuries will reduce the severity of bank crisis II, the losses will likely be enough to force several banks into bankruptcy.
I think you are spot on about the zombie banks seeking capital anywhere they can find it like vampires. It was a good general article.
I would recommend proofreading or editing as it was a difficult to finish.
On Dec 31 05:04 AM Reggie Middleton wrote:
> I see the well mannered, polite crowd still frequents the SA boards.
> I luv y'all too.
>
> As a commenter inferred earlier, your criticisms will hold much more
> weight if delivered with just the slightest modicum of professionalism.
Even the GDP to assets ratio does not tell the whole story, because Swiss central government is very weak compared to other national governments. Small infusions are likely, but the money simply doesn't exist for a large scale bailout as we saw with all the major U.S. and UK banks.
Felix Salmon has some good articles on this topic if you are interested.
Reggie, I commend your article. Could have been a little shorter, but there is a lot to be said. Amen. (and congratulatons on your returns!) I worked at a major bank for many years that happened NOT to get into the Option Arm Lending. They were told often that they were not up with the times ("out of touch") and we lost business to the likes of WAMU and Countrywide. This same bank picked up Wakovia this fall, (without fed money) so I am not sure of this addition (Reggie, help?) Also, not sure about that other shoe dropping in the likes of com'l lending....
!
@rogerj12, Reggie isn't the only analyst who's been seeing this.
Reggie, I've been following your work from afar for two years now. You've done well; keep up the good work.
As to the ad hominem attacks on this thread, I sense that at least some of them come from people who have lost a lot of money.
Some folks know what time it is. Some don't.
You said "Regardless, so many have come to the conclusion that the worse in the housing market has been priced in and it will all come to a bottom in six months. Ha! A whole new world of pain awaits with the pay-option ARM mortgages getting prematurely pushed to early hard recasting due to the preciptious drop in housing values.
Due to their five-year hard recast nature, most weren't expected to hit the banks in earnest until 2010. However, they have this nugget buried in their pits...a maximum 110% or 115% negative amortization trigger. Since approximately 80% of these mortgages have utlitized the interest only payment minimum, nothing has been paid into principal. Add to that the 20% or so decline in house values and these loans are coming to that trigger point years early. These will be instant defaults. INSTANT, as payments will virtually double for a house that people will now be overhwhelming underwater in.
These loans could make subprime look like a stroll in the park."
I have been doing research for an article on housing for the past several weeks. Your comment shows a knowledge of the nature of the still unresolved housing problems that most do not recognize. I am trying to define mitigating events that could unfold, but they are hard to find.
Thanks for a great comment.
Every bank in the US is bankrupt and will not be profitable for years...just propped up...
Those that chose to bash Reggie Middleton should check out his work. It is some of the most in-depth analysis you will find!
While the pundits were telling everyone the worst was over and to buy, buy, buy (that includes Mr. Bove) Reggie's analysis told you how sick the financial companies were. If the pundits took the time to do their job and actually report the truth, they would have told you exactly what Reggie had been stating since 2007.
Pundits have a job and that's to help Wall Street take your money. I highly recommend those who decided to bash on Reggie to take a look at his site and his data. You WILL NOT be disappointed. You'll get the truth backed up by factual data. Look over some of the data Reggie put out there on MS, LEH, GS, and WFC. When the pundits started reporting on earnings reports that were stretched truths, you would have already known exactly what amounts of Hide the Level 3 assets these firms had.
If you want to see a difference in your accounts, check out his work. Yes, I am biased. Why? Because I've been checking out his site for months and I've been very well educated by his information as well as benefiting financially.
Reggie... Thanks for an awesome year!!!! Looking forward to 2009 with you.
If 'marked-to-market' is, as the banks claim, a misrepresentation of the true value of toxic assets, why is any bank making new mortgage loans at 'only' 5.1% or buying TBills at 0.01%? Why wouldn't they instead buy up all the toxic waste they could get their hands on and take the 100-200% gain they all claim they will realize at maturity? Certainly 200% beats 5.1%. Perhaps they do not believe their own claims?
So in effect it is funded by shareholders in the good times and funded by the taxpayers in the bad times. At some point in time both lose their money. Smart people like Reggie get the money.
Thank you once again for the time and effort you put in, trying to actually help people become better investors.
The sad truth is that things are going into the toilet (seekingalpha.com/artic...). As more and more people lose their homes, they sell whatever they can. People cut back where ever they can. They sell cars, homes, liquidate their IRA's and 401K's, and even pile on credit card debt. Perhaps it is because these impending defaults are so horrific that people refuse to believe them. An environment of "stuff blowing up" is not healthy for banks, brokerages, or people's livelihoods.
Right now there is a great deal of volatility and plenty of money to be made on either side of being long or short.
Clark Jenkins
FishGoneBad.com
On Dec 30 06:39 PM TPoise wrote:
> He also forgets that GS and MS have full FDIC protection on anything
> they issue for the next two years. So if they have a true problem,
> they can VERY easily raise cash by issuing the FDIC-backed corporate
> bonds at ridiculous interest rates and "borrow" their way out of
> whatever problem is hounding them.
>
> Except, there aren't any problems hounding them. Sure they lost and
> will continue to bleed quarterly, but they have access to the Fed
> Discount Window and for all intents and purposes are money-center
> banks.
I have done reasonably well in both shorting and then going long with WFC now and again. I think that the government overlay here makes these investments "too complex" at least for me.
There are a lot of people that believe as this writer does that the banks are still hiding lots of I think "garbage" would be the polite term on their balance sheets. So the risk of another large failure cannot be written off. However, I think that letting Lehman fail and the aftermath of that convinced a lot of government and policy types that the alternative of letting a big financial institution fail is just too scary right now. Crap they rescued GMAC..when not many people were looking. I do not see them letting another large one go anytime soon.
I really should qualify my statements upon rereading. I know what I meant, but it wasn't clear. So let me clarify. Regarding the pay-option mortgages, I miswrote. The majority (80%) pay the minimum monthly payment which is even worse than the interest only payment. It is that fact that will put them into the 110-115% negative amortization zone sooner than their 5 year hard recasts. The rapid decline in home prices puts then further underwater than that, thus putting the owners in the position of not being able to refinance no matter what or to face double payments NOW, not five years from now. Those are going to be automatic defaults for the most part across the board.
Since you are gathering information for an article, and lord knows I'd love to see one that actually covered all that the media doesn't (I swear they've abandoned indepth research), let me refer you to a fantastic, albeit scary chart from the IMF 2007 Global Financial Stability Report. Go to pdf page 8 or report page 23 and have a look at Figure 1.7 Monthly Mortgage Rate Resets. There you will see the volume of option payment ARMS's based on the years they are expected to hard recast. This is the schedule that has now been moved up. It's not pretty.
www.imf.org/External/P...
Further, let me refer you to someone who is incredibly knowledgable on the intricacies of the mortgage situation and an early caller of the devastation we are now bearing witness to. I found him via Herb Greenberg, an analyst for whom I have much respect and who used to have a position on Marketwatch but left last year for reasons I do not know. Herb speaks for and cites this gentlemen for his credentials and incredible research.
Now the reason I give you such an indepth preface is that the gentleman's site looks...well...amateur... alarmist, and a bit silly. However, I can assure you that this is the person with which you'd like to familiarize yourself with and read what he's got to say. He covers the pay option ARMS in depth showing what happens to payments etc.
The site is (sigh) :
mrmortgage.ml-implode..../
Good luck!
On Dec 31 02:57 PM John Lounsbury wrote:
> Sharon W - - -
>
> You said "Regardless, so many have come to the conclusion that the
> worse in the housing market has been priced in and it will all come
> to a bottom in six months. Ha! A whole new world of pain awaits with
> the pay-option ARM mortgages getting prematurely pushed to early
> hard recasting due to the preciptious drop in housing values. <br/>
>
> Due to their five-year hard recast nature, most weren't expected
> to hit the banks in earnest until 2010. However, they have this nugget
> buried in their pits...a maximum 110% or 115% negative amortization
> trigger. Since approximately 80% of these mortgages have utlitized
> the interest only payment minimum, nothing has been paid into principal.
> Add to that the 20% or so decline in house values and these loans
> are coming to that trigger point years early. These will be instant
> defaults. INSTANT, as payments will virtually double for a house
> that people will now be overhwhelming underwater in.
>
> These loans could make subprime look like a stroll in the park."
>
>
> I have been doing research for an article on housing for the past
> several weeks. Your comment shows a knowledge of the nature of the
> still unresolved housing problems that most do not recognize. I am
> trying to define mitigating events that could unfold, but they are
> hard to find.
>
> Thanks for a great comment.
You could try achieving audience by not insulting a mass group of them for simply reading your article. Impress us with numbers and hard work of research, not sophomoric quips.
Thanks for the references. I have been processing a long list of sources, but have not looked at these. I'll get to them tomorrow,
Thanks again.
I suggest you look at his early youtube stuff.
I was glad to see your endorsement of Mr. Mortgage. I also had a chance to peruse your website. Needless to say, I chuckled over your follow-up to this article/post today. It was a pleasure to view some more of the details and as I found the Fitch report on the web via your mention of it.
Later in the day I had gone back to read Mr. Mortgage when I then noticed that aside from Herb Greenberg being on his Blogroll, he also has you listed. Additionally, he also has Bill Fleckenstein, another I've been following listed. Suddenly, I realized that for the last two or so years I have been traveling within the same circle, but just finding new people all on the same route in different areas of the tubez. LOL
Shorter though perhaps egotistical-sounding version may be...great minds think alike. Or more humbly, a good mind knows enough to find and understand the great ones. :)
financial stocks he has mentioned, especially GS. The sad BS about GS
I'm afraid, is Hank, Tim, and just about all the heavy hitters that manipulate
the banks, are beholding to their alma mater, GS, with the biggest fish of all
dare I say his name, owing GS their souls. GS, otherwise known as "The
Satan Brokerage" will only survive because of what and who is in just the right places, the people in office and the ones going to that office.
If this is all too conspiracy sounding, just check out who holds the power
who is from "The Satan Brokerage" such as Hank, Tim, etc. Then check out how much money and who backed Barack's, oopps I said his name, campaign from the very beginning. As much as I would drool at the prospect of a belly up GS, I'm afraid their are too many people who owe the devil, GS, enormous favors. I'm with you Reggie, GS should be lying
next to Lehman in a coffin. Who knows, maybe the "Golden Shoes" will
finally get what they deserve. But what do I know, I'm just an ex- bond trader from the 80's.
That said, I'd love to hear some BULL predictions from Reggie. Any?